922 F.

2d 1122
59 USLW 2433, 1991-1 Trade Cases 69,293

TICOR TITLE INSURANCE COMPANY, Chicago Title

Insurance
Company, SAFECO Title Insurance Company (now known as
Security Union Title Insurance Company), Lawyers Title
Insurance Corporation and Stewart Title Guaranty Company,
Petitioners,
v.
FEDERAL TRADE COMMISSION, Respondent.
No. 89-3787.

United States Court of Appeals,

Third Circuit.
Argued Aug. 28, 1990.
Decided Jan. 9, 1991.
Order on Denial of Rehearing and
Rehearing In Banc March 12, 1991.

John C. Christie, Jr., Patrick J. Roach, Bell, Boyd & Lloyd, Washington,
D.C., for petitioners Chicago Title Ins. Co. and SAFECO Title Ins. Co.
(now known as Security Union Title Ins. Co.).
Robert E. Cooper, Gibson, Dunn & Crutcher, Los Angeles, Cal., and
Phillip H. Rudolph, Gibson, Dunn & Crutcher, Washington, D.C., for
petitioner Ticor Title Ins. Co.
John F. Graybeal (argued), John J. Butler, Parker, Poe, Adams &
Bernstein, Raleigh, N.C., for petitioner Lawyers Title Ins. Corp.
David M. Foster, James N. Plamondon, Fulbright & Jaworski,
Washington, D.C., for petitioner Stewart Title Guar. Co.
James M. Spears, Gen. Counsel, Jay C. Shaffer, Deputy Gen. Counsel,
Ernest J. Isenstadt, Asst. Gen. Counsel, Leslie Rice Melman (argued),
F.T.C., Washington, D.C., for respondent.

Heidi B. Hamman Shakely and Zella M. Smith, Asst. Counsels, Victoria

A. Reider, Deputy Chief Counsel, Linda J. Wells, Chief Counsel, Com. of
Pennsylvania, Ins. Dept., Harrisburg, Pa., for amicus curiae Com. of
Pennsylvania, Ins. Dept.
Before HUTCHINSON and NYGAARD, Circuit Judges, and RE, Judge* .
OPINION OF THE COURT
HUTCHINSON, Circuit Judge.

Five of the nation's largest title insurance companies, Ticor Title Insurance
Company, Chicago Title Insurance Company, SAFECO Title Insurance
Company (now operating under the name Security Union Title Insurance
Company), Lawyers Title Insurance Corporation and Stewart Title Guaranty
Company (collectively Ticor), petition for review of a final order of the Federal
Trade Commission (FTC). In a forty-seven page majority opinion that formed
the basis of the FTC's final order, the FTC held that the five title insurance
companies engaged in "[u]nfair methods of competition" in violation of Sec. 5
of the Federal Trade Commission Act (FTC Act), 15 U.S.C.A. Sec. 45(a)(1)
(West Supp.1990), when they collectively agreed to set rates for title search
and examination services in six states. The final order found antitrust violations
in Arizona, Connecticut, Montana, New Jersey, Pennsylvania and Wisconsin.

In its petition for review, Ticor does not dispute the FTC's holding that the
horizontal price-fixing agreements among five of the nation's largest title
insurance companies for title search and examination services at issue in this
case were anti-competitive and unfair within the meaning of Sec. 5 of the FTC
Act. Instead, Ticor advances four alternate arguments for reversal of the FTC's
final order. Ticor's first argument is that the state action doctrine, which traces
its origin to the Supreme Court's opinion in Parker v. Brown, 317 U.S. 341, 63
S.Ct. 307, 87 L.Ed. 315 (1943), immunizes its challenged collective rate setting
activities from antitrust liability. Ticor's second argument is that its challenged
activities are exempt from the antitrust laws pursuant to Sec. 3(a) of the
McCarran-Ferguson Act, 15 U.S.C.A. Sec. 1013(a) (West 1976). Ticor's third
argument is that its activities constitute joint petitioning of state regulators
immune from antitrust liability under the Noerr-Pennington doctrine. See
Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127,
81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381
U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). Ticor's final and most
abbreviated argument, taking up less than two pages of the ninety pages of
briefing it submitted in this cause, is that the FTC's final order is void because

its proceeding violated the doctrine of separation of powers since the FTC
exercises executive power and yet is not subject to the executive branch's
control.1
3

For the reasons set forth below, we hold that Ticor's collective rate setting for
title search and examination services in these six states is immune from federal
antitrust liability under the state action doctrine. As we examine in more detail
below, the state action doctrine limits the reach of the FTC's enforcement
jurisdiction. As a result, we find it unnecessary to address at any great length
Ticor's other three arguments in favor of reversing the FTC's order. Thus, we
will grant Ticor's petition for review and will vacate the FTC's final order.

I.
4

On January 7, 1985, the FTC issued an administrative complaint alleging that

six2 of the nation's largest title insurance companies had engaged in "[u]nfair
methods of competition" in violation of Sec. 5 of the FTC Act, 15 U.S.C.A.
Sec. 45(a)(1) (West Supp.1990).3

The alleged antitrust violation was the insurers' agreements collectively to set
rates for title search and examination services.4 At one time or another, these
insurers set uniform rates for title search and examination services through
private "rating bureaus" in thirteen states. The FTC did not challenge the
insurers' collective formulation of uniform rates for insuring against the risk of
loss from defective title. Thus, this aspect of title insurance is not before us.

The matter came before an administrative law judge (ALJ) who held hearings
and took evidence. The ALJ issued an initial decision and proposed order on
December 26, 1986. The ALJ found without merit the insurers' claims that the
collective formulation of rates for title search and examination services is part
of the "business of insurance" exempt from the FTC Act pursuant to Sec. 3(a)
of the McCarran-Ferguson Act, 15 U.S.C.A. Sec. 1013(a) (West 1976). The
ALJ also rejected the insurers' claim that the challenged conduct was protected
from antitrust liability under the Noerr-Pennington doctrine as joint petitioning
of state regulators in an attempt to influence state policy.

As to the insurers' remaining defense of state action,5 the ALJ ruled that in
Connecticut and Wisconsin the insurers' collective rate setting was not
supervised at all and thus could not satisfy the "active supervision" requirement
of the doctrine. The ALJ held that the insurers' price-fixing in Arizona, Idaho,
Montana, New Jersey and Pennsylvania satisfied the two-pronged state action

defense and was thus immune from antitrust liability. Finally, the ALJ ruled
that with respect to Ohio, the FTC's complaint counsel, who prosecuted the
case on behalf of the government, failed to prove that the insurers used their
rating bureau to establish uniform rates for title search and examination
services.
8

The insurers appealed the ALJ's initial decision to the FTC, and complaint
counsel cross-appealed. On September 19, 1989, the FTC, through four
commissioners, issued its final order and decision affirming in part and
reversing in part the ALJ's decision.6 It is the FTC's decision that is before us
for review.

In its decision, the FTC independently considered the record, including the
ALJ's initial decision and findings. With respect to the insurers' state action
defense, the FTC rejected its application to New Jersey and Pennsylvania,
finding that the relevant state statutes did not clearly articulate a policy to
displace competition with regulation.7 The FTC found that the contrary position
that the state insurance departments in both states advanced was in conflict with
the plain and unambiguous meaning of the relevant state statutes.

10

The FTC also rejected the state action defense as to Arizona, Connecticut,
Montana and Wisconsin on the ground that the "active supervision"
requirement of the state action doctrine was not satisfied.8 The FTC dismissed
the complaint's allegations concerning Idaho and Ohio. It split evenly over
whether there was active supervision of the insurers' collective ratemaking in
Idaho. It agreed with the ALJ that the FTC's complaint counsel failed to
demonstrate a sufficient link between the collective filing of risk rates and fees
for the insurers' search and examination services in Ohio.

11

Next, the FTC held that the insurers' collective formulation of charges for
search and examination services was not part of the "business of insurance" and
thus was not exempt from regulation under the FTC Act by reason of the
McCarran-Ferguson Act. The FTC agreed with the ALJ that searches and
examinations are services that persons and entities other than insurance
companies commonly perform. Further, the FTC found that insurance
companies themselves usually differentiate between the rates charged for
indemnification against loss from non-record title defects (which the FTC
viewed as the core function of title insurance) and the rates charged for tracking
down title defects prior to writing the policy.

12

The FTC then went on to reject the insurers' claim that their collective

ratemaking for search and examination services was immunized from antitrust
regulation under the Noerr-Pennington doctrine. The FTC wrote that the
challenged conduct was the type of commercial activity that has traditionally
had its validity determined by the antitrust laws and was not "political activity
with a commercial impact." Joint Appendix (Jt.App.) at 170.
13

The FTC's final order to cease and desist prohibits the insurers from fixing
prices for title search and examination services in the six states where
violations of law were found. However, the order contains a proviso that
permits collective establishment of rates for search and examination services in
any of these states if undertaken "pursuant to clearly articulated and
affirmatively expressed state policy and where such collective activity is
actively supervised by a state regulatory body."9 Jt.App. at 125.

14

In their petition to this Court, the insurers ask us to reverse the FTC's final
order. The FTC asks us to affirm the order and to issue our own order
mandating its enforcement, which Congress requires us to do to the extent the
FTC's order is affirmed. See 15 U.S.C.A. Sec. 45(c) ("To the extent the order
of the Commission is affirmed the court shall thereupon issue its own order
commanding obedience to the terms of such order of the Commission.").

II.
15

As a result of the FTC's dismissal in its final decision of the complaint's

allegations concerning Ticor's settlement and escrow services, the issues before
us relate solely to Ticor's collective setting of rates for title search and
examination services. A brief description of title search and examination
services, and the role such services play in the issuance of a policy of title
insurance, is helpful to an understanding of this case.10

16

Title to a piece of real estate is evidence of an ownership interest in that

property. However, title is not proof of absolute ownership. For example, a
search of public records concerning a particular piece of real estate may
disclose that there are liens, encumbrances, easements, covenants, restrictions
or other claims in existence as to that property. Examination of the title itself
would often reveal none of these preexisting defects.

17

As a result, potential purchasers of real estate and their lenders desire to know
before purchasing or financing a purchase of property whether the title has any
preexisting defects. Once such defects are discovered, the purchasers and
lenders can determine whether to continue with the deal as is, whether to

demand cure of certain or all of the defects or whether to call off the deal.
18

Title insurance did not become widely used until after the conclusion of World
War II. At that time, a national market in secondary mortgages emerged. The
attractiveness of title insurance was due in large part to the limitations inherent
in the two methods of verifying title that existed prior to the widespread use of
title insurance. These two methods that were seen as somewhat unsatisfactory
were the use of title searchers and the use of attorneys' opinions.

19

The role of title searchers is clear from their name. They examine the public
records concerning a piece of property, which includes the chain of title for that
property, and report the results of that examination. A title searcher's liability
for an erroneous report was limited, however, to his negligence. If the searcher
made an error in searching the public records, someone harmed could recover
only after proving that a reasonable title searcher would not have made such an
error. Furthermore, a title searcher had no liability for title defects that were not
listed in the public records. Title searchers continue to practice their trade
today; however, most now work for title insurance companies.

20

The meaning of an attorneys' opinion is also largely self-evident. Whereas title

searchers merely report on the existence of recorded documents concerning a
particular title, an attorneys' opinion evaluates the legal significance of any title
defects that have been discovered. However, an attorney's liability for an
erroneous opinion is also limited to his professional negligence. Thus, just as
with title searchers, an attorney is not liable for hidden defects in the public
records that a diligent searcher could not have discovered or for public records
that are themselves inaccurate.

21

By comparison, title insurance offers much broader protection in the event that
the state of the title differs from that which a title insurance company reports it
to be. The technical definition of title insurance is an agreement to indemnify
the purchaser or lender "for loss or damage sustained by reason of a defect in
title not explicitly excepted or excluded from the policy." Jt.App. at 37. In order
to recover, it is unnecessary to prove negligence. Further, title insurance
protects the buyer and the lender from losses resulting from defects not
discoverable from a search of the public records. Such undiscoverable defects
can include forgery, missing heirs, previous marital interests, impersonation and
confusion of names.

22

As noted just above, title insurance indemnifies the purchaser or lender for loss
or damage sustained by reason of a defect in title not explicitly excepted or

excluded from the policy. Before issuing a title insurance policy, the insurance
company conducts a search of the public records just as a title searcher or an
attorney would do. In fact, title insurance companies most often employ their
own searchers or attorneys to search and examine the public records. The title
insurance policy usually will not insure any defects that are uncovered during
this search. Instead, agents are trained specifically to exempt these record
defects from the scope of coverage. Thus, a title insurance policy usually
insures only against undiscovered and undiscoverable title defects, regardless of
negligence.
23

Title insurance companies choose from among three different groups of people
to perform title searches. In the first group are title searchers who work for the
title insurance company. We have already examined the role that such title
searchers play. The second is the attorney-agent, who serves as an agent of one
or several particular insurance companies. The attorney-agent searches and
examines title documents. As compensation for his work, the agent receives
from the title insurance company a fee that the insurance company has fixed in
advance. The third is the approved attorney. An approved attorney does not
have a direct employment relationship with the insurance company as does the
attorney-agent. Instead, the title insurance company provides a list of approved
attorneys to its customers; then, the customer and the approved attorney are
free to negotiate the approved attorney's fee for the search and examination
services he will perform. Often the same attorney will be an attorney-agent for
one title insurance company and an approved attorney for another.

24

While often difficult to separate, a title search is distinct from a title

examination. The search denotes the act of compiling a chronological account
of the publicly recorded instruments that are found in the chain of title to a
particular piece of real estate. Many jurisdictions require that the search extend
back sixty years, although some jurisdictions have marketable title acts that
require a shorter resort to history while other jurisdictions require tracing title as
far back as its original issuance by the sovereign. The examination requires the
critical evaluation of the title's condition as reflected in the documents gathered
in the search.

25

This case involves Ticor's collective setting of rates for the search and
examination services it performs. In the six states at issue, these rates are
collectively set through private organizations known as title insurance rating
bureaus. Title insurance companies comprise the membership of these bureaus.
Once the title insurance rating bureau establishes the uniform rate for search
and examinations services in a certain state, the insurance companies that are
members of the bureau charge this rate for these services.

III.
26

27

We have jurisdiction pursuant to 15 U.S.C.A. Sec. 45(c) (West 1973) over the
FTC's final order in this matter, since the FTC's cease and desist order includes
within its scope methods of competition practiced within this Circuit. Ticor
filed its petition for review within sixty days after the FTC served the final
order,11 which is within the applicable time the statute provides for filing such
a petition. The FTC had jurisdiction to adjudicate this matter pursuant to 15
U.S.C.A. Sec. 45(b) (West Supp.1990).
We have written that "the state action exemption cases clearly indicate that this
issue involves a question of law...." Euster v. Eagle Downs Racing Ass'n, 677
F.2d 992, 997 (3d Cir.), cert. denied, 459 U.S. 1022, 103 S.Ct. 388, 74 L.Ed.2d
519 (1982); see also New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d
1064, 1072 (1st Cir.1990) ("How these facts meld into the state action concept-the issue now before us--is a legal issue which the courts have plenary
authority to decide." ). Thus, we exercise plenary review over the FTC's
application of the state action doctrine to the facts before us.

IV.
28

As the Supreme Court has stated, "[t]he starting point in any analysis involving
the state-action doctrine is the reasoning of Parker v. Brown [, 317 U.S. 341, 63
S.Ct. 307, 87 L.Ed. 315 (1943) ]." Hoover v. Ronwin, 466 U.S. 558, 566, 104
S.Ct. 1989, 1994, 80 L.Ed.2d 590 (1984). In Parker, the Supreme Court wrote:

29 find nothing in the language of the Sherman Act or in its history which suggests
We
that its purpose was to restrain a state or its officers or agents from activities directed
by its legislature. In a dual system of government in which, under the Constitution,
the states are sovereign, save only as Congress may constitutionally subtract from
their authority, an unexpressed purpose to nullify a state's control over its officers
and agents is not lightly to be attributed to Congress.
30

The Sherman Act makes no mention of the state as such, and gives no hint that
it was intended to restrain state action or official action directed by a state.

31

Parker, 317 U.S. at 350-51, 63 S.Ct. at 313. In 324 Liquor Corp. v. Duffy, 479
U.S. 335, 343, 107 S.Ct. 720, 725, 93 L.Ed.2d 667 (1987), the Supreme Court
wrote that Parker "rests on principles of federalism and state sovereignty."

32

The "state action" doctrine immunizes private price-fixing if such conduct is (1)

undertaken pursuant to a clearly articulated and affirmatively expressed state

policy to displace competition with regulation and (2) the state itself actively
supervises the conduct. See Southern Motor Carriers Rate Conference, Inc. v.
United States, 471 U.S. 48, 57, 105 S.Ct. 1721, 1726, 85 L.Ed.2d 36 (1985);
California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97,
105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233 (1980).
A.
33

As to New Jersey and Pennsylvania, the FTC determined that Ticor's fixing of
title search and examination charges did not reflect a clearly articulated and
affirmatively expressed state policy as is required under the first prong of the
Midcal test. The FTC's complaint counsel conceded for purposes of this
litigation that both New Jersey and Pennsylvania actively supervised Ticor's
fixing of title search and examination services in the two states, thereby
satisfying Midcal 's second prong. See Jt.App. at 69 n. 184.

34

Two Supreme Court cases are central to an understanding of Midcal 's first
prong, which requires that a state policy must be clearly articulated and
affirmatively expressed in order to confer antitrust immunity. Those cases are
Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d
24 (1985), and Southern Motor Carriers, 471 U.S. 48, 105 S.Ct. 1721, 85
L.Ed.2d 36.

35

In Hallie, the Supreme Court was faced with deciding whether a municipality's
anticompetitive conduct met the first prong of the Midcal test.12 In deciding
whether the state clearly articulated and affirmatively expressed an
anticompetitive policy, the Supreme Court adopted the views of the plurality in
City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 415, 98 S.Ct.
1123, 1138, 55 L.Ed.2d 364 (1978) (opinion of Brennan, J.), that one need not
"be able to point to a specific, detailed legislative authorization" in order to
satisfy Midcal 's first prong. See Hallie, 471 U.S. at 39, 105 S.Ct. at 1716.
Instead, the Court in Hallie held it was sufficient to satisfy the "clear
articulation" test that Wisconsin's legislature had passed statutes giving the
municipality "broad authority to regulate," thus making it "clear that
anticompetitive effects logically would result." Id. at 42, 105 S.Ct. at 1718; see
also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 109, 99 S.Ct.
403, 411, 58 L.Ed.2d 361 (1978) (while California's Automobile Franchise Act
evidenced no express intent to displace the antitrust laws, it nevertheless
qualified for state action immunity because Act provided a regulatory structure
that inherently "displace[d] unfettered business freedom.").

36

Thus, in Hallie the Supreme Court held that in order to satisfy the clear
articulation requirement of the state action test, one merely had to show that
"the legislature contemplated the kind of action complained of." Hallie, 471
U.S. at 44, 105 S.Ct. at 1719 (quotation omitted). In so doing, the Court
rejected a competing argument that to satisfy the clear articulation requirement
the legislature had to "expressly state in a statute or its legislative history that
the legislature intends for the delegated action to have anticompetitive effects."
Id. at 43, 105 S.Ct. at 1718. In a footnote, the Court explained why it rejected
this argument:

37

Requiring such a close examination of a state legislature's intent to determine

whether the federal antitrust laws apply would be undesirable ... because it
would embroil the federal courts in the unnecessary interpretation of state
statutes. Besides burdening the courts, it would undercut the fundamental
policy of Parker and the state action doctrine of immunizing state action from
federal antitrust scrutiny.

38

Id. at 44 n. 7, 105 S.Ct. at 1719 n. 7.

39

In Southern Motor Carriers, the Supreme Court held that a state did not have to
compel private parties to perform anticompetitive conduct in order for the state
action doctrine to immunize such conduct from antitrust liability. See Southern
Motor Carriers, 471 U.S. at 60, 105 S.Ct. at 1728. Instead, a clearly articulated
policy that permits anticompetitive conduct is sufficient to meet the state action
doctrine's clear articulation requirement. See id. at 61, 105 S.Ct. at 1729. Thus,
the issue in Southern Motor Carriers was whether the state legislatures in
Georgia, Mississippi, North Carolina and Tennessee clearly sanctioned the
collective ratemaking at issue there.

40

The Court found that three of the states, Georgia, North Carolina and
Tennessee, had statutes that expressly permitted common carriers to engage in
collective ratemaking. See id. at 63, 105 S.Ct. at 1730. However, Mississippi
posed a more difficult question, since its legislature "ha[d] not specifically
addressed collective ratemaking." Id. Thus, the Court had to decide "whether, in
the absence of a statute expressly permitting the challenged conduct, the first
prong of the Midcal test can be satisfied." Id.

41

In Mississippi, the only evidence of whether the legislature had contemplated

the action complained of was a law that gave the state public service
commission the authority to regulate common carriers. See id. The law required
the commission to promulgate "just and reasonable" rates. See id. The Court

held that this law was sufficient evidence of the legislature's intent that the
commission, instead of the competitive market, should determine the rates.
Even though the legislature did not supply the details of "the inherently
anticompetitive rate-setting process," id. at 64, 105 S.Ct. at 1730, it was
sufficient that the legislature left such details up to the commission's discretion.
Thus, when the commission "exercised its discretion by actively encouraging
collective ratemaking among common carriers," the Supreme Court held that
the carriers who took advantage of the ability to set rates collectively in
Mississippi were immune from antitrust liability under the state action doctrine.
Id. The Court concluded:
42

If more detail than a clear intent to displace competition were required of the
legislature, States would find it difficult to implement through regulatory
agencies their anticompetitive policies. Agencies are created because they are
able to deal with problems unforeseeable to, or outside the competence of, the
legislature. Requiring express authorization for every action that an agency
might find necessary to effectuate state policy would diminish, if not destroy,
its usefulness. Therefore, we hold that if the State's intent to establish an
anticompetitive regulatory program is clear, as it is in Mississippi, the State's
failure to describe the implementation of its policy in detail will not subject the
program to the restraints of the federal antitrust laws.

43

Id. at 64-65, 105 S.Ct. at 1730-1731 (citation and footnote omitted).

1.
44

With these teachings in mind, we will first examine whether the State of New
Jersey has a clearly articulated and affirmatively expressed policy that permits
Ticor to charge collectively set rates for title search and examination services
that its attorney-agents perform. The FTC held, over the dissent of
Commissioner Calvani, that New Jersey lacked such a policy and therefore
ruled that Ticor's activities in that state were not immune under the state action
doctrine. The FTC's holding reversed the ALJ's holding that New Jersey did
authorize the collective setting of rates for fees paid to attorney-agents for the
title search and examination services they perform. See Jt. App. at 111.

45

New Jersey law pertaining to title insurance companies is found at

N.J.Stat.Ann. Secs. 17:46B-1 to -62 (West 1985 & Supp.1990). It is known as
the Title Insurance Act of 1974. See N.J.Stat.Ann. Sec. 17:46B-2. It is clear that
New Jersey's legislature intended the Act to have broad application. Section
17:46B-3 states:

46

The provisions of this act shall apply to all title insurance companies, title
insurance rating organizations, title insurance agents, applicants for title
insurance, policyholders and to all persons and business entities engaged in the
business of title insurance.

47

Id. Sec. 17:46B-3.

48

The FTC based its holding that New Jersey did not have a clearly articulated
policy that permitted the collective setting of fees to be paid to attorney-agents
for the search and examination services they perform upon the Act's definition
of "fee." See id. Sec. 17:46B-1(f). While the Act permits title insurance
companies to engage in the collective setting of rates, which include fees,
through their privately operated rating bureaus, see id. Secs. 17-46B-41 to -53,
the FTC held that New Jersey's definition of "fee" explicitly excluded any
reimbursement paid to an attorney.
The Act's definition of "fee" states:

49

"Fee" for title insurance means and includes the premium for the assumption of
the insurance risk, charges for abstracting or searching, examination,
determining insurability, and every other charge, whether denominated
premium or otherwise, made by any of them, but the term "fee" shall not
include any charges paid to and retained by an attorney at law whether or not he
is acting as an agent of a title insurance company or an approved attorney.

50

Id. Sec. 17:46B-1(f).13 Ticor argues that Sec. 17:46B-1(f)'s definition of fee is
intended merely to make clear that the state will not regulate legal fees
unrelated to title insurance transactions, such as issuing opinions.

51

In support of its argument, Ticor points to the fact that New Jersey's
Commissioner of Insurance, the state official whom the legislature has charged
with regulating the title insurance industry, has approved its collective filings of
rates that included the charges paid to attorney-agents for title search and
examination services. See Jt.App. at 626-59. The Act requires the
Commissioner to disapprove any filing that "does not meet the requirements of
this act." N.J.Stat.Ann. Sec. 17:46B-45(b).14 Further, Ticor points to the ALJ's
finding that "the history of title insurance rate regulation in New Jersey suggests
that the state intended that inclusive rates should apply to attorney-agents."
Jt.App. at 68.

52

The state action doctrine rests on principles of federalism and state sovereignty.

52

The state action doctrine rests on principles of federalism and state sovereignty.
Since the Supreme Court of New Jersey has not yet spoken on whether the Act
permits New Jersey to regulate attorney-agent charges for search and
examination services, we are forced to predict how that court would resolve the
question. The Act, taken as a whole, clearly indicates New Jersey's intent to
regulate broadly the state's title insurance industry. In the face of that strong
intent, we believe the Supreme Court of New Jersey would hold that Ticor's
suggested construction of the Act's definition of "fee" is reasonable. Under
Ticor's construction, "fee" is defined to exclude charges paid to attorneys solely
as a concession to the state's organized bar, in order to make clear that the
Insurance Commissioner is not empowered to regulate generally the fees
attorneys charge.

53

Under New Jersey law, where a state agency is empowered to implement a

regulatory scheme pursuant to an ambiguous statutory framework, state courts
will defer to the agency's reasonable construction of the statute. See In re
Township of Bridgewater, 95 N.J. 235, 471 A.2d 1, 5-6 (1984) ("We have held
that an administrative agency's interpretation of a statute that it is charged with
enforcing is entitled to due deference."). We believe the Insurance
Commissioner's construction of the Act to permit his regulation of attorneyagents' charges for search and examination services is reasonable and thus
worthy of our deference.

54

Furthermore, we believe it is possible to construe the Act to permit the

Commissioner to regulate what attorney-agents charge for title search and
examination services, even if such charges do in fact fall outside the Act's
definition of "fee." In Schwartz v. Commonwealth Land Title Ins. Co., 374
F.Supp. 564 (E.D.Pa.1974), Judge Becker, then a United States District Judge
and now a member of our Court, was faced with a similar quandary. There, the
court had before it the question of whether the Pennsylvania state Insurance
Department in fact regulated a charge that sellers of real estate had to pay at the
closing of a sale when the closing occurred in the office of a title insurance
company. While the Insurance Department refused to accept filing of the socalled "seller charge" as a fee, Judge Becker wrote that "[t]he Department's
view that the charge was not a 'fee' did not preclude its regulation under a
number of other provisions, and the Department never suggested that it had no
power to regulate the seller charge simply because it was not a 'fee.' " Id. at 577
n. 16. Thus, the court held: "We find that the Pennsylvania regulatory statutes
are comprehensive and confer virtually plenary regulatory power on the state
Insurance Department, including the power to regulate the seller charge." Id. at
577.

55

Likewise, we hold that the FTC erred when it held that New Jersey lacked a

clearly articulated policy to permit the collective setting of rates attorney-agents

will be paid for the search and examination services they provide. Even if we
were to agree that such charges are excluded from the statutory definition of the
word "fee," this does not preclude New Jersey from otherwise regulating this
discrete charge.
56

Finally, we will once again assume that New Jersey's Insurance Commissioner
lacks the statutory authority to regulate search and examination charges paid to
attorney-agents. As Professors Areeda and Hovenkamp, distinguished students
of antitrust law, have written: "If the private defendant's challenged conduct is
the result of reasonable reliance on apparently lawful government action, then
[state action] immunity [under Midcal 's clear articulation prong] should be
available." P. Areeda & H. Hovenkamp, Antitrust Law Sec. 212.4b, at 153
(Supp.1989).

57

Even if New Jersey's Supreme Court should declare in the future that New
Jersey's Insurance Commissioner's regulation of Ticor's collective setting of
rates paid to attorney-agents for search and examination services was unlawful,
we believe that the professors are correct that Ticor's actions in reliance on the
apparent lawfulness of the Commissioner's actions would provide antitrust
immunity up until such a declaration occurs. As the professors have written:
"The agency's action must have reasonably appeared to be lawful both in
relation to the antitrust laws--for example, no wholesale delegation of
unsupervised private power to act anticompetitively--and in relation to the
scope of the agency's authority under state law." Id. at 154. We believe that
Ticor meets both of these requirements in New Jersey. See also Llewellyn v.
Crothers, 765 F.2d 769, 774 (9th Cir.1985) (Kennedy, J.) (" 'ordinary' errors or
abuses in the administration of powers conferred by the state should be left for
state tribunals to control" (quoting Areeda, Antitrust Immunity for "State
Action" after Lafayette, 95 Harv.L.Rev. 435, 453 (1981))).

2.
58

The relevant facts in Pennsylvania are basically the same. The FTC held, over
the dissent of Commissioner Calvani, that Pennsylvania lacked a policy that
permitted the collective setting of rates that attorney-agents charge for search
and examination services. The FTC therefore ruled that Ticor's activities in that
state were not immune under the state action doctrine. The FTC's holding
reversed the ALJ's holding that Pennsylvania did authorize the collective
setting of rates for fees paid to attorney-agents for the title search and
examination services they perform. See Jt.App. at 111.

59

Pennsylvania's Title Insurance Act, found at 40 Pa.Stat.Ann. Secs. 910-1 to

910-54 (Purdon 1971 & Supp.1990), also has broad application. It states:

60

The provisions of this article shall apply to all title insurance companies, title
rating organizations, title insurance agents, applicants for title insurance,
policyholders and to all persons and business entities engaged in the business of
title insurance.

61

40 Pa.Stat.Ann. Sec. 910-2. The Pennsylvania Insurance Department is the

state's executive agency entrusted with the responsibility of executing and
enforcing all of Pennsylvania's insurance laws. See Brief of Pennsylvania
Insurance Department as amicus curiae at 4. The Act requires insurance
companies or the private rating organizations to which they belong to file with
the Insurance Department a manual of fees. See 40 Pa.Stat.Ann. Sec. 910-37(a).

62

Once again, in holding that Pennsylvania had not clearly articulated a policy
that permits the collective setting of rates paid to attorney-agents for search and
examination services, the FTC relied on the Act's definition of "fee." The
definition states:

63

"Fee" for title insurance means and includes the premium, the examination and
settlement or closing fees, and every other charge, whether denominated
premium or otherwise, made by a title insurance company, agent of a title
insurance company or an approved attorney of a title insurance company, or
any of them, to an insured or to an applicant for insurance, for any policy or
contract for the issuance of, or an application for any class or kind of, title
insurance; but the term "fee" shall not include any charges paid by an insured or
by an applicant for insurance, for any policy or contract, to an attorney at law
acting as an independent contractor and retained by such attorney at law,
whether or not he is acting as an agent of or an approved attorney of a title
insurance company, or any charges made for special services not constituting
title insurance, even though performed in connection with a title insurance
policy or contract.

64

Id. Sec. 910-1(5).

65

The Pennsylvania Insurance Department has approved Ticor's collectively set

rates for charges paid to attorney-agents for title search and examination
services, even though the Act requires the Department to reject any filings that
do not "meet the requirement of this article." Id. Sec. 910-40(a). No one has
ever challenged the Department's regulation of these charges, even though

Pennsylvania law entitles any "person aggrieved by any action of the

commissioner, except disapproval of a filing or a part thereof," to an
administrative hearing. Id. Sec. 910-49(a).
66

Ticor again argues that the definition's exclusion of charges paid to attorneys
was intended as a concession to the bar that the state's Insurance Department
could not regulate the traditional business of lawyering. For the same reasons as
were applicable to New Jersey, the FTC's holding with respect to Pennsylvania
cannot stand. Given Pennsylvania's clear intent broadly to regulate the title
insurance industry, we believe the Supreme Court of Pennsylvania, which has
yet to address the issue, would find Ticor's construction of the definition of
"fee" to be reasonable.

67

Since the Act is open to more than one reasonable construction, we believe the
Supreme Court of Pennsylvania would defer to the Insurance Department's
construction of the Act to permit its regulation of search and examination
charges paid to attorney-agents. See Masland v. Bachman, 473 Pa. 280, 374
A.2d 517, 522 (1977) (where specialized agency is entrusted with
implementing act, agency's interpretation of act is "entitled to significant
weight"); Spicer v. Pennsylvania Dep't of Pub. Welfare, 58 Pa.Cmwlth. 558,
428 A.2d 1008, 1009 (1981) ("It is well settled that the construction of a statute
by those charged with its execution and application is entitled to great weight
and should not be disregarded or overturned except for cogent reasons, and
unless it is clear that such construction is erroneous." (internal quotations
omitted)).

68

It is true that prior to 1975 Pennsylvania's Insurance Department did not

construe the Act to allow it to regulate charges paid to attorney-agents when
acting as title insurance agents. However, the principles of federalism and state
sovereignty that underlie the state action doctrine do not permit us to question
the merits of the Insurance Department's change in construction where the socalled "new" construction appears on its face to be reasonable.

69

Further, as the opinion in Schwartz explains, see 374 F.Supp. at 577 & n. 16,
even if Pennsylvania law did not permit its Insurance Department to regulate
these charges as "fees," it seems clear that the Act nevertheless gives the
Insurance Department the power to regulate these charges. Finally, Ticor was
and is entitled to rely upon the Insurance Department's apparently lawful
regulation of these charges and the state action doctrine will immunize its
reliance until it becomes clear that the Insurance Department in fact has no
authority to regulate title search and examination charges paid to attorneyagents in Pennsylvania.

3.
70

Therefore, we hold that Ticor has shown that both New Jersey and
Pennsylvania have clearly articulated a policy that permits the collective setting
of rates for charges paid to attorney-agents for title search and examination
services. Since the FTC's complaint counsel stipulated before the ALJ that both
New Jersey and Pennsylvania met the second, active supervision prong of the
Midcal state action test, we conclude that Ticor's actions in New Jersey and
Pennsylvania were immune from antitrust liability under the state action
doctrine. Thus, we must grant Ticor's petition for review and vacate the FTC's
final order to the extent it applies to Ticor's activities in New Jersey and
Pennsylvania.

B.
71

The FTC held that Arizona, Connecticut, Montana and Wisconsin did not
"actively supervise" Ticor's collective setting of rates and thus Ticor failed to
satisfy the second prong of the Midcal test as to those four states. The FTC's
complaint counsel stipulated before the ALJ that these four states authorized
the anticompetitive activity, see Jt.App. at 65, so issues relating to Midcal 's
second prong are all that remain before us.

72

The Supreme Court explained the rationale behind the active supervision
requirement in Patrick v. Burget, 486 U.S. 94, 108 S.Ct. 1658, 100 L.Ed.2d 83
(1988). It wrote:

73 active supervision requirement stems from the recognition that "[w]here a

The
private party is engaging in the anticompetitive activity, there is a real danger that he
is acting to further his own interests, rather than the governmental interests of the
State." Hallie v. Eau Claire, 471 U.S. 34, 47, 105 S.Ct. 1713, 1720, 85 L.Ed.2d 24
(1985); see id., at 45, 105 S.Ct. at 1719-1720 ("A private party ... may be presumed
to be acting primarily on his or its own behalf"). The requirement is designed to
ensure that the state action doctrine will shelter only the particular anticompetitive
acts of private parties that, in the judgment of the State, actually further state
regulatory policies. Id., at 46-47, 105 S.Ct. at 1720. To accomplish this purpose, the
active supervision requirement mandates that the State exercise ultimate control over
the challenged anticompetitive conduct. The mere presence of some state
involvement or monitoring does not suffice. The active supervision prong of the
Midcal test requires that state officials have and exercise power to review particular
anticompetitive acts of private parties and disapprove those that fail to accord with
state policy. Absent such a program of supervision, there is no realistic assurance
that a private party's anticompetitive conduct promotes state policy, rather than

merely the party's individual interests.

74
75

Id., at 100-01, 108 S.Ct. at 1663 (some citations omitted).

In the aftermath of Patrick, it is clear that the active supervision test requires
that the state "have and exercise" the power to review the particular
anticompetitive acts. The Supreme Court found that state action immunity was
not available in Patrick because the state did not "have" the power to supervise
the challenged activity. See id., at 102, 108 S.Ct. at 1664.

76

In Midcal and 324 Liquor Corp., the Supreme Court articulated four factors that
are pertinent in deciding whether a state actively supervises challenged
conduct. They are: (1) whether the state establishes the rates, see 324 Liquor
Corp., 479 U.S. at 345, 107 S.Ct. at 726; Midcal, 445 U.S. at 105, 100 S.Ct. at
943; (2) whether the state reviews the reasonableness of the rates, see 479 U.S.
at 345, 107 S.Ct. at 726; 445 U.S. at 105, 100 S.Ct. at 943; (3) whether the state
monitors market conditions, see 479 U.S. at 345, 107 S.Ct. at 726; 445 U.S. at
106, 100 S.Ct. at 943; and (4) whether the state had engaged in any "pointed
reexamination" of its program, see 479 U.S. at 345, 107 S.Ct. at 726; 445 U.S.
at 106, 100 S.Ct. at 943.

77

We believe the First Circuit's recent opinion in New England Motor Rate
Bureau v. FTC, 908 F.2d 1064 (1st Cir.1990), is most instructive on what type
of showing is necessary to satisfy Midcal 's active supervision prong. In New
England Motor Rate Bureau, the FTC brought an enforcement action against a
private rating bureau whose members were motor carriers. The members of the
rating bureau had been collectively setting rates they would charge for
transportation within the State of Massachusetts and several other New England
states. The only issue before the court was whether Massachusetts actively
supervised the motor carriers' collective rate setting so as to satisfy Midcal 's
second prong.

78

Massachusetts used a "negative option" approach to regulate rates. Under this

approach, filed rates became binding unless the state rejected or suspended the
rates within a specified time. While the state had "extensive power to suspend,
reject or modify rates," id. at 1065, Massachusetts "ha[d] not in recent history
rejected any of the rates ... nor held hearings or investigations." Id.

79

Despite these facts, the First Circuit held that Massachusetts had and exercised
the power to review and disapprove of anticompetitive acts that failed to accord
with state policy. The court wrote that it was clear that a Massachusetts state

agency had plenary power to review and disapprove of filed rates. See id. at
1070. As a result, the court held that the state agency had "the authority to
'review particular anticompetitive acts of private parties and disapprove those
that fail to accord with state policy,' " id. at 1071, thus satisfying one of the two
parts of the active supervision requirement.
80

Next, the court examined whether Massachusetts "exercised" the power that it
"had." Criticizing the FTC's approach as "too demanding in the showing it
would require as to the rigor and efficiency of a particular state's regulatory
program," id., the court wrote:

81
Where
as here the state's program is in place, is staffed and funded, grants to the
state officials ample power and the duty to regulate pursuant to declared standards of
state policy, is enforceable in the state's courts, and demonstrates some basic level of
activity directed towards seeing that the private actors carry out the state's policy and
not simply their own policy, more need not be established. Otherwise, the state
action doctrine would be turned on its head. Instead of being a doctrine of
preemption, allowing room for the state's own action, it would become a means for
federal oversight of state officials and their programs.
82

Id.

83

Examining the four factors the Supreme Court mentioned in Midcal and 324
Liquor Corp, the First Circuit noted that the Supreme Court never had written
that all four factors must be present before a court can find that active
supervision exists. Id. at 1074. In New England Motor Rate Bureau, the court
held that the presence of the first two of the four factors, that Massachusetts
sets the rates and that the state reviews the reasonableness of the rates, was
sufficient to establish the existence of active supervision. In that case, the court
found the other two factors, whether the state monitors the market and whether
the state has engaged in any "pointed reexamination" of its program, to be
absent. Nevertheless, their absence was not fatal to the establishment of active
supervision. Id. at 1073.

1.
84

With respect to Arizona, the FTC held over the dissent of Commissioner
Azcuenaga that active supervision of Ticor's collective ratemaking was lacking
between 1968 and 1981.15 In so holding, the FTC reversed the ALJ, who had
held that active supervision was present in the state. As the basis of its holding,
the FTC found a lack of active supervision because Ticor's 1968 filing went
into effect essentially unreviewed and because Arizona's Insurance Department

failed to undertake a formal examination of the rating bureau even though an

Arizona statute permitted such an examination. In Arizona, Ticor collectively
set its rates through the Title Insurance Rating Bureau of Arizona, a private
organization comprised of title insurance companies.

85

Our first inquiry is to determine whether Arizona "had" the power to regulate
Ticor's collective ratemaking. It is clear the answer to this first inquiry is "yes."
State law required Arizona's state-run Insurance Department to make sure that
all rate bureau filings complied with the statutory requirement that rates not be
excessive, inadequate or unfairly discriminatory. See Ariz.Rev.Stat.Ann. Secs.
20-375(A) & 20-376(D). State law also required title insurers to provide with
their rate filings a statement justifying the rates. See id. Sec. 20-377. Finally,
the state's Insurance Department was required to reject any rates if they did not
meet the statutory criteria. See id. Sec. 20-378(A).

86

Next, we must examine whether Arizona "exercised" its power to regulate

Ticor's collective ratemaking. We believe the First Circuit undertook the proper
inquiry in New England Motor Rate Bureau. Thus, we will examine whether
Arizona's program of supervision was in place, was staffed and funded, had
granted to the state officials ample power and the duty to regulate pursuant to
declared standards of state policy, was enforceable in the state's courts, and had
demonstrated some basic level of activity directed towards seeing that the
private actors carry out the state's policy and not simply their own policy. If so,
"more need not be established." New England Motor Rate Bureau, 908 F.2d at
1071.

87

The facts before us demonstrate that Arizona's program of supervision was in

place between 1968 and 1981. See Jt.App. at 81. Further, there is every
indication that Arizona's Insurance Department was staffed and funded during
this period. Next, as we have already seen, the Arizona legislature granted the
Insurance Department ample power and the duty to enforce the law pursuant to
the legislative standards. This duty was enforceable in Arizona's state courts.
See Industrial Dev. Auth. of the County of Pinal v. Nelson, 109 Ariz. 368, 509
P.2d 705, 714 (1973) (action for a writ of mandamus is available to compel a
public official to perform his duty).

88

Finally, the record demonstrates that the Insurance Department engaged in

some basic level of activity directed at ensuring that Ticor carried out the state's
policy and not simply its own. Following Ticor's rate filing in 1968, the
Arizona Insurance Department sought information as to how a component of
the rates was derived. The chief deputy director of Arizona's Insurance
Department testified that every filing submitted from 1973 to 1982 "was

examined to see if it met the statutory requirements. It was scrutinized and it

was either approved or disapproved. There would sometimes be situations
where more information was needed and once that was obtained and [the filing]
met the requirements, it would be approved." Jt.App. at 1153. The ALJ found
that no filing went into effect in Arizona until the director of the Insurance
Department marked the filing "approved." Jt.App. at 80.
89

Turning next to the four factors the Supreme Court discussed in Midcal and
324 Liquor Corp, it is clear that Arizona has the final word in setting title
insurance rates. These rates must be filed with the Insurance Department, and
they cannot go into effect if the Insurance Department suspends or rejects them.
It is also clear that Arizona has reviewed the reasonableness of the title
insurance rates. The record before us does not show whether Arizona's
Insurance Department in fact monitors market conditions. The record does
show that Arizona has not undertaken a "pointed reexamination" of its program.
As the First Circuit held in New England Motor Rate Bureau, we hold that the
absence of the final two Midcal and 324 Liquor Corp. factors is not fatal to
Ticor's state action defense.

90

The FTC erred when it held that Ticor failed to show that Arizona actively
supervised its collective filing of rates. Arizona both had and exercised the
power to ensure that Ticor's rates complied with the policy that state has
articulated.

91

The root of the FTC's error and its explanation seem to lie in its insistence on
sitting "in judgment upon the degree of strictness or effectiveness with which a
state carries out its own statutes." New England Motor Rate Bureau, 908 F.2d at
1076 (emphasis in original). As in that case, the FTC here takes the position
"that the 'active supervision' prong necessitates an inquiry by the FTC into
whether a particular state's regulatory operation demonstrates satisfactory zeal
and aggressiveness. The FTC would, in effect, try the state regulator." Id. at
1075. We agree with the First Circuit's conclusion that "this goes too far." Id.

2.
92

With respect to Connecticut, the FTC over Commissioner Azcuenaga's dissent

held that no active state supervision was present. The FTC's holding affirmed
the ALJ's conclusion that active supervision was lacking in Connecticut. The
FTC did not find active supervision in Connecticut because it believed that the
state failed meaningfully to regulate the level of agency commissions, over
which the insurance companies had no control. We disagree with the FTC's
holding.

93

Our first inquiry is whether Connecticut officials had the authority to supervise
Ticor's collective filing of rates. As with Arizona, it is clear the answer is "yes."
State law required Connecticut's state-run Insurance Department to make sure
that all rate bureau filings complied with the statutory requirement that rates not
be excessive, inadequate or unfairly discriminatory. See Conn.Gen.Stat.Ann.
Sec. 38-201x(b)(2) (West 1987). State law also required title insurers to provide
with their rate filings a statement justifying the rates. See id. Sec. 38-201x(a)
(2). Finally, the state's Insurance Department was required to reject any rates if
they did not meet the statutory criteria. See id. Sec. 38-201p(b).

94

Next, we review whether Connecticut "exercised" the authority it had to

supervise Ticor's collective filing of rates. The record shows that Connecticut's
program of supervision was in place during the relevant time and that it was
staffed and funded. Connecticut granted to its state officials ample power and
the duty to regulate pursuant to declared standards of state policy. This duty was
enforceable in the state's courts. See Beccia v. City of Waterbury, 185 Conn.
445, 441 A.2d 131, 136 (1981) (action for a writ of mandamus is available to
compel a public official to perform his duty).

95

Further, Connecticut's Insurance Department demonstrated some basic level of

activity directed towards seeing that the private actors carried out the state's
policy and not simply their own policy. Following Ticor's 1966 rate filing, the
state's Insurance Department requested justification for the premium fee. See
Jt.App. at 71. The Insurance Department later approved the 1966 rate filing.
See id. Ticor's second collective filing in Connecticut occurred in 1981. It is
clear that the Insurance Department read the filing and approved it. Ticor's final
collective filing in Connecticut took place in 1983. The Insurance Department
approved the 1983 filing, even though Ticor had yet to supply supporting data.
A Connecticut regulator testified that the state's Insurance Department "reviews
every filing that we receive." Jt.App. at 1218. Just as with Arizona, Connecticut
satisfied the first two of the four Midcal and 324 Liquor Corp. factors. For
these reasons, Ticor has established that Connecticut exercised its power to
control Ticor's collective rate setting activity in that state.

96

The basis of the FTC's contrary holding is its finding that Connecticut failed
"meaningfully" to regulate the levels of agent commissions, which
Commissioner Strenio, the author of the FTC's majority opinion, described as
excessively high in his separate supplemental statement. See Jt.App. at 195.
This description is telling. The FTC's analysis is inconsistent with the principles
that inform the state action doctrine. State action immunity is available not only
when a state acts wisely; instead, the wisdom of a state's policy is immaterial.
As the Supreme Court has written, state action immunity is available wherever

a state clearly articulates and actively supervises a policy that will displace
competition.
3.
97

In Montana, the private rating bureau Ticor belonged to received its license in
1982 and ceased to exist in 1984. Its only major rate filing occurred in
February, 1983. The ALJ found that active state supervision existed in
Montana. The FTC disagreed, holding that the 1983 filing went into effect
without any state review.

98

Once again, we begin by asking whether Montana's officials had the authority
to supervise Ticor's collective filing of rates. As with Arizona and Connecticut,
it is clear the answer is "yes." State law required Montana's state-run Insurance
Department to make sure that all rate bureau filings complied with the statutory
requirement that rates not be excessive, inadequate or unfairly discriminatory.
See Mont.Code Ann. Secs. 33-1-311 & 33-16-201. State law also required title
insurers to provide with their rate filings a statement justifying the rates. See id.
Sec. 33-16-203. Finally, the state's Insurance Department was required to reject
any rates if they did not meet the statutory criteria. See id. Secs. 33-16-204 to
33-16-206, 33-16-211. This is sufficient to establish that Montana's Insurance
Department had the power to supervise Ticor's collective filings of title search
and examination charges.

99

Next, we review whether Montana "exercised" the authority it had to supervise

Ticor's collective filing of rates. The record shows that Montana's program of
supervision was in place during the relevant time and that it was staffed and
funded. Montana granted to its state officials ample power and the duty to
regulate pursuant to declared standards of state policy. This duty was
enforceable in the state's courts. See Jeppeson v. Montana, Dep't of State
Lands, 205 Mont. 282, 667 P.2d 428, 431 (Mont.1983) (action for a writ of
mandamus is available to compel a public official to perform his duty (quoting
Mont.Code Ann. Sec. 27-26-102(1)).

100 Further, Montana's Insurance Department demonstrated some basic level of

activity directed towards seeing that the private actors carried out the state's
policy and not simply their own policy. Ticor supported its 1983 filing with a
five page single-spaced cover letter. See Jt.App. at 500-04. Following the
filing, someone from Ticor's rating bureau met with officials of Montana's
Insurance Department. See id. at 90. The state officials told Ticor's
representative that the increase would go into effect immediately and approved
the filing. See id. However, the state officials requested additional supporting

data.16 See id. Just as with Arizona and Connecticut, Montana satisfied the first
two of the four Midcal and 324 Liquor Corp. factors. For these reasons, Ticor
has established that Montana exercised its power to control Ticor's collective
rate setting activity in that state.
101 The FTC's conclusion was based upon its belief that Montana did not do enough
to confer state action immunity upon Ticor. To the contrary, we believe that
while the quality of Montana's actions may deserve the criticism that the FTC
levels, the quantity of Montana's actions are sufficient to allow Ticor to invoke
the state action doctrine.
4.
102 In Wisconsin, the rate bureau Ticor belonged to submitted general rate filings
in 1971, 1981 and 1982. The ALJ held that there was no active state
supervision in Wisconsin. The FTC affirmed.
103 Again, we first examine whether state officials in Wisconsin had the power to
regulate Ticor's collective filing of rates for title search and examination
services. As with Arizona, Connecticut and Montana, it is clear the answer is
"yes." State law required Wisconsin's state-run Insurance Department to make
sure that all rate bureau filings complied with the statutory requirement that
rates not be excessive, inadequate or unfairly discriminatory. See
Wisc.Stat.Ann. Sec. 625.11(1). State law also required title insurers to provide
with their rate filings a statement justifying the rates. See id. Sec. 625.13.
Finally, the state's Insurance Department was required to reject rates following a
hearing if they do not meet the statutory criteria. See id. Sec. 625.22. This is
sufficient to establish that Wisconsin's Insurance Department had the power to
supervise Ticor's collective filings of title search and examination charges.
104 Next, we review whether Wisconsin "exercised" the authority it had to
supervise Ticor's collective filing of rates. The record shows that Wisconsin's
program of supervision was in place during the relevant time and that it was
staffed and funded. Wisconsin granted to its state officials ample power and the
duty to regulate pursuant to declared standards of state policy. This duty was
enforceable in the state's courts. See Law Enforcement Standards Bd. v. Village
of Lyndon Station, 101 Wis.2d 472, 305 N.W.2d 89, 99-100 (1981) ("
'Mandamus is the proper remedy to compel public officers to perform duties
arising out of their office and presently due to be performed.' ").
105 Further, Wisconsin's Insurance Department demonstrated some basic level of

activity directed towards seeing that Ticor carried out the state's policy and not
simply its own policy. Wisconsin's Insurance Department raised questions
regarding the 1971 filing and later ruled that it was acceptable. The Insurance
Department checked the 1981 filing for accuracy. The 1982 filing also received
some review from Insurance Department. Just as with Arizona, Connecticut and
Montana, Wisconsin satisfied the first two of the four Midcal and 324 Liquor
Corp. factors. For these reasons, Ticor has established that Wisconsin exercised
its power to control Ticor's collective rate setting activity in that state.
5.
106 The FTC held that Arizona, Connecticut, Montana and Wisconsin failed Midcal
's adequate supervision prong because the regulators in those states were
unqualified, they approved rates that the FTC's commissioners would not have
approved and they generally did not regulate to the degree that the FTC found
desirable. Even if the FTC is correct, its conclusions miss the point.
Availability of the state action doctrine does not depend upon the quality of
state supervision. The principles of federalism and state sovereignty that
undergird the doctrine prohibit its selective application only where states act in
a manner that a federal agency or federal court finds to be preferable. Instead,
the state action doctrine recognizes that states can implement anticompetitive
policies, even policies that depend upon private actors such as Ticor, free from
federal supervision where the state clearly articulates and actively supervises
the policy.
107 The FTC's complaint counsel stipulated that Arizona, Connecticut, Montana
and Wisconsin clearly articulated the anticompetitive policies at issue here. We
have held that these states actively supervised those same anticompetitive
policies. Thus, Ticor's setting of collective rates for title search and
examination services in these four states is immune from antitrust liability. We
therefore must vacate the remainder of the FTC's final order.17
V.
108 Accordingly, we hold that Ticor's collective setting of rates charged for title
search and examination services in Arizona, Connecticut, New Jersey,
Pennsylvania, Montana and Wisconsin is immune from antitrust liability under
the state action doctrine. As a result, the FTC lacked jurisdiction to bring an
enforcement action against Ticor. We will thus grant Ticor's petition for review
and vacate the FTC's final order in its entirety.SUR PETITION FOR
REHEARING

March 12, 1991.

109
110 PRESENT: SLOVITER, Chief Judge, BECKER, STAPLETON,
MANSMANN, GREENBERG, HUTCHINSON, SCIRICA, COWEN,
NYGAARD and ALITO, Circuit Judges, and RE, Judge* .
111

The petition for rehearing filed by respondent in the above captioned matter
having been submitted to the judges who participated in the decision of this
court and to all the other available circuit judges of the circuit in regular active
service, and no judge who concurred in the decision having asked for rehearing,
and a majority of the circuit judges of the circuit in regular active service not
having voted for rehearing by the court in banc, the petition for rehearing is
denied

112 Chief Judge Sloviter, Judge Becker and Judge Scirica would grant rehearing.

Hon. Edward D. Re, Chief Judge of the United States Court of International
Trade, sitting by designation

In 1985, Ticor filed suit against the FTC in the United States District Court for
the District of Columbia challenging the prosecution of this action solely on
grounds that the FTC was unconstitutionally exercising executive branch
authority in violation of the principle of separation of powers. The district court
dismissed the challenge as unripe since the FTC had yet to take final action.
See Ticor Title Ins. Co. v. FTC, 625 F.Supp. 747 (D.D.C.1986), aff'd, 814 F.2d
731 (D.C.Cir.1987). While the court of appeals affirmed the district court's
dismissal of the constitutional challenge, the three judges on its panel wrote
separate opinions, no one of which garnered a majority, concerning whether the
district court's dismissal was justified by a failure to exhaust administrative
remedies, a lack of final agency action or a lack of ripeness. See Ticor, 814
F.2d 731

One of the six original respondents, First American Title Insurance Company,
settled the charges against it in a consent agreement with the FTC. See In re
Ticor Title Ins. Co., No. 9190 (July 30, 1987) (LEXIS, Trade library, FTC file).
Thus, the FTC's final order affected only five title insurance companies, all of
whom have joined as petitioners before this Court

In the weeks following the FTC's initiation of this action in 1985, thirteen class
action suits were filed against the insurance companies. The suits were
consolidated for pretrial purposes and were settled in a judgment entered in

June of 1986. Two state court challenges to the settlement judgment are
pending, one in Arizona and one in Wisconsin
4

The initial complaint also challenged the insurers' collective formulation and
filing of charges for settlement and escrow services. The FTC, in its final order,
dismissed these portions of the complaint since the FTC's complaint counsel
failed to develop a record sufficient to sustain the charges. Thus, the final order
only affects the insurers' collectively set rates for title search and examination
services

The "state action" doctrine protects private price-fixing if such conduct is (1)
undertaken pursuant to a clearly articulated and affirmatively expressed state
policy to displace competition with regulation and (2) the state itself actively
supervises the conduct. See California Retail Liquor Dealers Ass'n v. Midcal
Aluminum, Inc., 445 U.S. 97, 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233 (1980)
The original complaint challenged joint price-setting in thirteen states. The
insurers raised the state action defense with respect to twelve of these thirteen
states. Following the Supreme Court's decision in Southern Motor Carriers
Rate Conference, Inc. v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85
L.Ed.2d 36 (1985), the FTC's complaint counsel declined to pursue charges
concerning five of the thirteen states.
The issues tried before the ALJ relating to the state action defense were: (1) in
New Jersey and Pennsylvania, did the states authorize joint rate-setting of title
search and examination charges for attorney-agents and (2) in Arizona,
Connecticut, Idaho, Montana, Ohio and Wisconsin, was there active state
supervision.

The FTC's full compliment of commissioners is five. Commissioner Machol did

not participate in the decision that resulted in the final order in this matter.
Furthermore, Commission Chairman Steiger did not participate in the decision
leading to the final order because she took her post after the FTC reached its
decision but before the decision was issued. Chairman Steiger's predecessor,
Chairman Oliver, "[p]rior to leaving the Commission ... registered his vote in
the affirmative for the Final Order and the Opinion of the Commission in this
matter." Joint Appendix (Jt.App.) at 126 n *

Commissioner Calvani dissented as to this conclusion. In its amicus brief filed

in support of the insurers, the Pennsylvania Insurance Department, which is the
state executive branch agency responsible for the execution and enforcement of
all Pennsylvania insurance laws, also disagrees with this conclusion so far as it
construes the law of Pennsylvania

Commissioner Azcuenaga partially dissented from this holding, concluding

instead that Arizona and Connecticut did actively supervise the insurers' ratesetting activities

This proviso, of course, merely restates the requirements of the state action
doctrine. See supra note 5

10

This description is based on the excellent survey of this area that the ALJ
compiled in his opinion. See Jt.App. at 32-60

11

While the FTC issued its decision on September 19, 1989, the sixty days within
which to petition for review of the decision did not begin to run until the FTC
served its decision upon the insurers on October 20, 1989

12

The Court held that a municipality, in order to qualify for state action
immunity, need not satisfy the second prong of the Midcal test, which requires
that the state actively supervise the anticompetitive conduct. See Hallie, 471
U.S. at 46-47, 105 S.Ct. at 1720; see also Hancock Indus. v. Schaeffer, 811
F.2d 225, 235 (3d Cir.1987) ("In Hallie, the Court concluded that the second
element of the Midcal analysis did not apply when a municipality was the
decisionmaker.")

13

The word "them" in the Act's definition of "fee" lacks an antecedent. However,
reference to the immediately preceding definition, which explains the meaning
of the term "premium," sheds light on this problem. Section 17:46B-1(e) states:
"Premium" for title insurance means that portion of the fee charged by a title
insurance company, agent of a title insurance company or approved attorney of
a title insurance company, or any of them, to an insured or to an applicant for
insurance, for the assumption by the title insurance company of the risk created
by the issuance of the title insurance policy.
N.J.Stat.Ann. Sec. 17:46B-1(e).

14

The Act also provides any aggrieved person with the ability to challenge any of
the Commissioner's actions. See N.J.Stat.Ann. Sec. 17:46B-52. The FTC has
failed to bring to our attention any state challenge to the Commissioner's
approval of collectively set rates that attorney-agents charge for search and
examination services

15

Arizona's rating bureau went out of business for all purposes on December 16,
1981. See Jt.App. at 83. Arizona revoked the rating bureau's corporate charter
on October 1, 1983. See id

16

There is no evidence that Ticor ever supplied this supporting data. See Jt.App.
at 90

17

Because we hold that Ticor's setting of collective rates for search and
examinations services in all six states is immune from antitrust liability under
the state action doctrine, it is unnecessary to consider whether the same activity
is also exempt from antitrust regulation under the McCarran-Ferguson Act as
the business of insurance or is exempt from antitrust regulation as protected
petitioning of state regulators under the Noerr-Pennington doctrine. See, e.g.,
Southern Motor Carriers Rate Conference, 471 U.S. at 55 n. 17, 105 S.Ct. at
1725 n. 17 (1985) (finding of state action immunity "makes it unnecessary to
consider the applicability of [the Noerr-Pennington ] doctrine to the petitioners'
collective ratemaking activities.")
Furthermore, we decline to address Ticor's separation of powers argument. This
is an attack on the administrative state. Whatever the merits of such an attack,
Ticor has failed to present us with a fully developed argument; its argument that
we should hold that the FTC operates in violation of the principle of separation
of powers since it performs an executive function and yet is not subject to
executive branch control is cursory at best, taking up less than two pages of its
brief. As the Seventh Circuit wrote in a similar situation, "Brevity may be the
soul of wit, but seismic constitutional change is not a laughing matter." See
Hospital Corp. of Am. v. FTC, 807 F.2d 1381, 1392 (7th Cir.1986), cert.
denied, 481 U.S. 1038, 107 S.Ct. 1975, 95 L.Ed.2d 815 (1987).

Hon. Edward D. Re, Chief Judge of the United States Court of International
Trade, sitting by designation. Judge Re was limited to voting for panel
rehearing